ECRL revival bodes well for local construction sector

KUALA LUMPUR: There is expected to be more local participation in the revived East Coast Rail LInk project from the supply of material to awarding work to local beneficiaries, says Affin Hwang Capital research. 

It maintained its neutral call on the construction sector with SunCOn, HSS and AQRS as top buys.

In a note, it said potential immediate beneficiaries if the suspension on contracts are lifted include Lafarge Malaysia Bhd and HSS Engineers Bhd which previously won contracts worth RM270mil and RM130mil respecitvely. 

"Other potential beneficiaries are local contractors to be appointed subcontractors. 

"In our view, we believe AQRS, IJM Corp, WCT, WZ Satu, Econpile, Advancecon, Sunway Construction (SunCon) are in a good position to bid for subcontract works for the ECRL," it said.

The revival of the ECRL augurs well for the local construction industry and will have a potential positive multiplier effect on the local economy with the increase in local participation, said RHB.

"Newspaper reports quoted Tun Daim Zainuddin saying local participation in ECRL will increase to 50% of all works from 30% of civil works.

"This indicates RM22bn worth of contracts could be up for grabs for local players."

Construction stocks, which have run up recently on expectations of the project's revival, is expected to see some consolidation over the short-term.

"We believe it will take some time to finalise the detailed designs for the new alignment and undertake land acquisitions before construction contracts can be awarded," said RHB.